England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE No CHANI 97/0029/B

Royal Courts of Justice

Strand

London WC2

Thursday 16th October 1997

B e f o r e:

LORD JUSTICE KENNEDY

LORD JUSTICE MILLETT

SIR BRIAN NEILL

BARRATT MANCHESTER LTD

- v -

BOLTON METROPOLITAN BOROUGH COUNCIL

and

ATTORNEY-GENERAL

(Handed down judgment prepared by

Smith Bernal Reporting Limited, 180 Fleet Street,

London EC4A 2HD

Tel: 0171 831 3183

Official Shorthand Writers to the Court)

MR A W H CHARLES (Instructed by Treasury Solicitor) appeared on behalf of the Appellant

MR P SMITH QC and MR A SINGER (Instructed by Field Cunningham & Co of Manchester) appeared on behalf of the Respondent

J U D G M E N T

(As Approved by the Court )

(Crown Copyright)

LORD JUSTICE MILLETT:

This is an appeal from the judgment of His Honour Judge Gilliland QC dated 12th August 1996 dismissing the application of the Attorney-General (the "Attorney") to strike out an inquiry as to damages for want of prosecution or as abuse of the process of the court. Waller L.J. and I granted leave to appeal on 13 February, 1997. At the end of last term we indicated that we would dismiss the appeal and give our reasons later. This I now do.

The present case has a long and tortuous history. There is little point in repeating it at length here. Those who seek greater detail can discover it set out with admirable clarity in the judgment below. I shall content myself with a brief summary.

The proceedings arise out of plans to develop a plot of land near Bolton in Lancashire. The Plaintiff ("Barratt") is a part of well-known national house building group of companies. In 1985 it obtained planning permission to build 475 houses on a site called Birtenshaw Farm ( the "Site"). The Site was subject to a restrictive covenant granted in 1934 to the local authority then responsible for the area. The covenant, which was registered as a Class D (ii) land charge (the "Charge") against the original covenantor, required the land to be retained in perpetuity as a private open space for the benefit and amenity of the district. In order to enable the Site to be developed it was necessary to have the Charge vacated.

At the request of a local resident, the Attorney started relator proceedings against Barratt and the First Defendant, Bolton Metropolitan Borough Council (the "Council"), which was the statutory successor of the original covenantee and was agreeable in principle to the vacation of the Charge. By these proceedings the Attorney sought a declaration that the covenant was valid and enforceable and an injunction restraining breach. Barratt in turn started the present action in October 1989 against the Council seeking cancellation of the Charge. Both cases were heard by Scott J., who gave judgment in each instance in favour of Barratt and (in the present action) ordered that the registration of the Charge be vacated.

The Council decided to appeal the decision in the present action. The Judge granted a stay of his order to vacate the Charge on condition that the Council gave a cross-undertaking in damages, which it did on 9th April 1990. The Attorney also appealed in his proceedings but did not seek a stay of the order, being content to rely on the stay granted to the Council. Both appeals were dismissed by the Court of Appeal on 19th June 1991, and the stay then expired. The Court of Appeal directed that there should be an inquiry as to damages under the cross-undertaking. The Council's cross-undertaking thus covered the period from 9th April 1990 to 19th June 1991, and the inquiry in respect of its cross-undertaking will be limited to an investigation into what losses have been suffered by Barratt which are attributable to the maintenance of the registration of the Charge during that period.

The Council decided not to appeal the present action further. The Attorney, however, wished to appeal his own proceedings to the House of Lords. He was advised that the restrictive covenant would be circumvented and his appeal frustrated if the Charge were vacated in accordance with the judgment of the Court of Appeal in the present action, the Site sold to a bona fide purchaser for value and the sale completed before the Charge could be re-registered following a successful appeal. Accordingly the Attorney sought and on 18th. September 1991 obtained from the Court of Appeal an order joining him as Second Defendant to the present action so that he might appeal it to the House of Lords. At the same time he was granted a stay of the Court of Appeal's order vacating the registration of the Charge pending his appeal. As might be expected, however, the Court of Appeal only granted the stay on condition that the Attorney gave a cross-undertaking in damages. He undertook:-

"to abide by any order of the Court as to damages in case it should hereafter be of the opinion that the Plaintiff should have sustained any from and after 18th September 1991 by reason of the delay in vacation of the Class D (ii) Land Charge that the Attorney General ought to pay."

On 17th February, 1992, the House of Lords refused the Attorney leave to appeal in both actions. The temporary stay granted by the Court of Appeal then expired, and Barratt was at last able to have Charge vacated. The Attorney's cross-undertaking as to damages thus covered the period from 18th September 1991 to 17th February, 1992.

In March 1992 the Plaintiff's solicitors applied to the Court of Appeal for an order for an inquiry as to the damages which might be recoverable from the Attorney pursuant to his cross-undertaking. An order for such an inquiry was finally made by consent on 9th August 1993. Subsequently (in July 1994) the inquiry, together with a similar inquiry under the Council's cross-undertaking, was transferred to the Judge to be heard by him as official referee's business.

Barratt claims that if the new stay had not been granted on 18th September 1991 it would have started to build and market houses on the Site at or about that time. It claims damages against the Attorney under two heads: (i) the cost of the deferment of the receipt of revenue from house sales and (ii) additional site costs. These claims were originally estimated at £562,430 and £15,085 respectively. The case against the Attorney raises two main questions: (i) what (if any) delay in starting the development and marketing of the Site was caused by the existence of the stay from 18th September 1991 to 17th February 1992? and (ii) if any such delay was caused, what loss was sustained thereby by Barratt for which the Attorney ought to pay compensation?

The course of the inquiry has not run smoothly. Detailed directions were given by the Judge in November 1994. He ordered Barratt to serve Points of Claim on the Attorney by 17th March 1995 together with the report of a quantity surveyor particularising the damages claimed. The directions were not complied with and on 14th June 1995 the Judge was obliged to make an order requiring Barratt to serve its Points of Claim and quantity surveyor’s report by 14th. July on pain of having the inquiry struck out if it did not. Barratt served the documents at the last moment, but the Judge was satisfied that they failed to set out the material facts relied on or to identify the causal connection between the relevant facts and the heads of damage claimed. This led Barratt to seek an extension of time and leave to substitute a report from Coopers & Lybrand supporting a higher quantification of its claim.

Coopers & Lybrand calculated the losses sustained by Barratt differently from the way in which its quantity surveyor had previously calculated them. The effect of the new calculations was nearly to treble the total claims to more than £1.6 million. The Judge gave Barratt leave to substitute the report but his order was sealed only in mid-January 1996 and Coopers & Lybrand’s report was not available in its final form until 2nd May 1996. In the meantime, on 1st April 1996, the Treasury Solicitor had written at length expressing his concern at Barratt's failure to progress the inquiry and raising the possibility of an application to strike it out. On 2nd May 1996 the Attorney applied to dismiss the inquiry for want of prosecution. By then more than five years had passed since the Appellate Committee of the House of Lords had dismissed the Attorney's application for leave to appeal; and more than three years had passed since Barratt had obtained the order for the inquiry.

In the court below it was not suggested that the inquiry as to damages was itself an abuse of the process of the court. The issue was whether all further proceedings in the inquiry should be dismissed for want of prosecution. The Judge held that the well known principles established in Birkett v James [1978] A.C. 297 were, subject to some modification, applicable to the case. He found that Barratt was guilty of four periods of inordinate and inexcusable delay. These were as follows:-

(i) seven months, from December 1993 to July 1994 (failure to take out a summons for directions or actively to pursue the inquiry);

(ii) two months, in September and October 1994 (failure to obtain directions);

(iii) nine months, from mid-March to mid-December 1995 (failure to serve proper Points of Claim in compliance with the direction made in November 1994); and

(iv) two months, in March and April 1996 (delay in providing Coopers & Lybrand's report).

Both Barratt and the Attorney now accept the Judge's findings on inordinate and inexcusable delay. The present appeal is thus concerned solely with the element of prejudice.

Barratt claims that the continued maintenance of the registration of the Charge delayed the development of the Site for some two years, and that if work had proceeded in 1990 or 1991 it would have done so at the same pace as it did when development finally began in 1992. Accordingly, it claims that it has suffered a two year deferment in the receipt of the proceeds of house sales. Proof of these claims, Barratt says, will turn for the most part on documentary rather than oral evidence. The Attorney disputes these claims, and contends that it was not the continued existence of the Charge which inhibited the development of the Site but the risk of a successful appeal by the Attorney. This would have led to the reimposition of the Charge if previously cancelled and to a prohibition of all further work on the Site. He argues that Barratt could not sensibly have commenced the development while there was a risk that it might not be able to complete it. He says that at trial he would seek to explore Barratt's internal decision-making process, the attitude of local residents (because of the effect which their opposition to the development might have had), what was happening at other sites owned by Barratt (in case, for example, a failure to build on the Site would have freed resources for deployment elsewhere, so generating a positive cash flow and interest to set against the losses claimed), and the condition of the local and national housing market at the relevant time. The investigation of such issues, it is said, would necessarily involve the examination of witnesses, and the Attorney contends that he has been prejudiced by the delay because their memories will have faded in the meantime.

The Judge was not impressed by the Attorney's submissions. He analysed the various categories of witness, the significance of their contribution to Barratt's case, and the way in which the quality of their evidence might adversely affected by the lapse of time. He considered the evidence which was likely to be available from experts, directors and employees of Barratt, and local residents. He pointed out that the burden of proving that the losses claimed were due to the stay of the order vacating the registration of the Charge rested on Barratt. If there was any doubt as to what would have happened if there had been no stay, Barratt's claim would fail. In regard to each category of witness, the Judge concluded that on balance he was

"not satisfied that there has been or will be substantial prejudice to the Attorney as a result of the delay which has occurred nor that there is a substantial risk that there cannot be a fair trial".

Despite the Attorney's submissions to the contrary, I am not persuaded that the Judge's conclusion in this respect can be faulted. It seems to me to be not remotely likely that the Court holding the inquiry would find itself "wholly unable to form a view as to what finding is, on the balance of probability, the view most likely to accord with the truth": see Morris v London Iron and Steel Co. Ltd. [1988] QB 493 per Sir Denys Buckley.

In Birkett v James at p. 318 Lord Diplock described the approach which the Courts should adopt when considering an application to dismiss an ordinary action for want of prosecution. He said:

"The power should be exercised only where the court is satisfied .... (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party."

The question of principle which arises in this appeal is whether this second requirement -the requirement that prejudice must be shown - must be satisfied in an application to strike out an inquiry as to damages in circumstances such as the present. These concluding words are important. The principles established by Birkett v James apply generally to all kinds of proceedings, however commenced and whether the Court is asked to dismiss them under its inherent jurisdiction or under an express Rule of Court (see Halls v O’Dell [1992] QB 393). Moreover, they apply at every stage of such proceedings before final judgment. The facts that the proceedings in question consist of an inquiry as to damages and were commenced by summons are without significance. Where there is a split trial, the same principles apply to the assessment of damages as they do to the trial of liability.

An inquiry as to damages under a cross-undertaking, however, possesses a number of special features. The cross-undertaking in question is given to the Court, not to the party opposite, and may be enforced or discharged by the Court in its discretion. The party seeking to enforce the undertaking has no cause of action. Although entitled to apply to enforce the cross-undertaking, he has no legal right to its enforcement or to damages: see Cheltenham & Gloucester Building Society v Ricketts [1993] 1 WLR 1545. Any loss which he may have sustained is occasioned, not by a legal wrong, but in consequence of an order of the Court. Since there is no cause of action there is no period of limitation either; but the cross-undertaking cannot be enforced without the leave of the Court, which may be withheld if not applied for promptly: see Smith v Day (1882) 21 Ch.D. 421; Re Wood ex parte Hall (1883) 23 ChD 644. As those cases show, the Court does not inquire whether the other party has been prejudiced by the delay. The only question is whether the applicant has behaved with reasonable despatch.

If sufficient ground be shown, the Court can not only strike out the inquiry but discharge the cross-undertaking, so that there can be no question of starting enforcement proceedings again. In C.T.Bowring & Co. (Insurance) Ltd. v Corsi Partners Ltd. [1994] Ll.R. 567 at p.582 Sir Michael Kerr said that in relation to a cross-undertaking

“the Court acts or declines to act in its own right, not merely as an umpire in an adversarial process between the parties, though obviously having full regard to the position of the parties and the interests of justice. In deciding how to deal with such an undertaking the Court exercises a broad equitable jurisdiction...”

The question for decision is whether these features are sufficient to justify a different and more flexible approach to an application to dismiss an inquiry as to damages under a cross-undertaking for want of prosecution than to dismiss ordinary proceedings to vindicate a legal right for the same reason.

The requirement that prejudice must be shown has caused difficulty from the first and has been strongly criticised in many quarters; see for example Electricity Supply Nominees Ltd. v Longstaff and Shaw Ltd. (Unreported) CA 27th November 1986 per Mustill LJ and Westminster City Council v Clifford Cudpin & Partners (Unreported) CA 18th June 1987. The criticisms were considered by the House of Lords in Department of Transport v Chris Smaller (Transport) Ltd. [1989] AC 1197, but their Lordships decided that the time was not appropriate to adopt a different approach. Despite this, criticism of the rule persisted, and it was widely expected that the House would take the opportunity afforded by the recent case of Grovit v Doctor [1997] 1 WLR 640 to consider a more flexible approach. Instead, Lord Woolf emphasised that the Court has power to dismiss proceedings which constitute an abuse of the process of the Court, and indicated that where there is an abuse of process it is not strictly necessary to allege want of prosecution, even where inordinate and inexcusable delay are the factors relied upon to establish the abuse in question. This goes a long way towards abandoning the requirement of prejudice provided that the delay is sufficiently serious to be stigmatised as an abuse of process.

It is, therefore, necessary to examine the authorities to see why the element of prejudice is required in addition to inordinate and inexcusable delay. This does not appear from the speech of Lord Diplock in Birkett v James itself. In that case he was concerned primarily with the aspect of delay and the relevance of the fact that the limitation period has not expired by the time the application to dismiss is heard. He ruled that the effect of the statutes of limitation is that neither the passage of time before the issue of a writ within the limitation period nor delay in taking a step in the proceedings not exceeding the period allowed by the Rules for taking that step can qualify as inordinate or justify the dismissal of the action however prejudicial to the defendant such delay may be. One result of this approach has been that, provided that some prejudice has been occasioned by the delay, cumulative delays however slight beyond the time prescribed by the Rules are treated as inordinate.

In order to discover the source of the requirement that prejudice must be shown it is necessary to go back to the judgments of this Court in Allen v Sir Alfred McAlpine & Sons Ltd. [1968] 2 QB 229, where it appears most explicitly in the judgment of Salmon LJ. Lord Denning MR scarcely mentioned it. He equated prolonged delay with injustice. He said at p. 245:

"It was urged that we ought not to strike out a man's action without trial because it means depriving him of his right to come to the Queen's Courts. Magna Carta was invoked against us as if we were in some way breaking its provisions. To this there is a short answer. The delay of Justice is a denial of justice. "To no one will we deny or delay right or justice."

Lord Denning was concerned by what he described as "excessive delay", by which he meant delay which was so prolonged as to do grave injustice to one party or the other. He does not appear to have envisaged this as encompassing a mere accumulation of short delays beyond the time allowed for by the Rules, nor did he insist on prejudice as a separate requirement, though where it existed he naturally prayed it in aid as supporting the dismissal of the action.

Diplock LJ's judgment, however, contains the following important passage at p. 259:

“What then are the principles which the Court should apply in exercising its discretion to dismiss an action for want of prosecution upon a defendant's application? The application is not normally made until the period of limitation for the plaintiff's cause of action has expired. It is then a Draconian order and will not be lightly made. It should not in any event be exercised without giving the plaintiff an opportunity to remedy his default, unless the court is satisfied either that the default has been intentional and contumelious, or that the inexcusable delay for which the plaintiff or his lawyers have been responsible has been such as to give rise to a substantial risk that a fair trial of the issues in the litigation will not be possible at the earliest date at which, as a result of the delay, the action would come to trial if it were allowed to continue."

This analysis enabled him to say (at p. 256) that delay which justifies dismissal of an action for want of prosecution, as distinct from dismissal for disobedience to a peremptory order of the court,

"is ex hypothesi so prolonged that it involves a serious risk that there will not be a fair trial of the issues."

Here, too, the emphasis was on a single element, that of serious and prolonged delay, being delay sufficient to give rise to an inference that the possibility of a fair trial was at risk. The separation of the two elements and the consequential reduction in the duration of the delay came later.

The reason for insisting that delay alone is insufficient, and that the delay must have occasioned prejudice to the defendant, however, is evident. It is because the dismissal of an action is a Draconian measure. The order is not normally made unless the limitation period has expired, and accordingly it has the effect of depriving the plaintiff "of his right to come to the Queen's Courts." It is a denial of justice, for it denies his cause of action and deprives him of any remedy for the invasion of his legal rights. Lord Griffiths spoke in the same vein in Department "What is the purpose of striking out in such circumstances? If there can be a fair trial of the of Transport v Chris Smaller (Transport) Ltd. at p. 1207:

action and the defendant has suffered no prejudice...it clearly cannot be to do justice between the parties before the court; as between the plaintiff and the defendant such an order is manifestly an injustice to the defendant. The only possible purpose of such an order would be as a disciplinary measure which by punishing the plaintiff will have a beneficent effect upon the administration of justice by deterring others from similar delays."

This approach is in accordance with general principle: striking out a claim or defence, thereby affecting the parties’ legal rights, is not an appropriate response to procedural errors and ought not to be ordered unless they have caused injustice to the other party. In a well-known passage in Cropper v Smith (1883) 26 Ch.D. 700 at p. 710 Bowen LJ said:

"It is a well-established principle that the object of the court is to decide the rights of the parties and not to punish them for the mistakes they make in the conduct of the case by deciding otherwise than in accordance with their rights...Courts do not exist for the sake of discipline, but for the sake of deciding matters in controversy."

In my judgment this provides the solution to the problem posed in this appeal. In conducting an inquiry of the present kind and ascertaining the amount of the loss suffered by the plaintiff which is covered by the defendant's cross-undertaking the court is not engaged in determining the legal rights of the parties. The discharge of the defendant's cross-undertaking does not deprive the plaintiff of his legal right to damages, for he has none. It may expose him to irrecoverable loss in consequence of an earlier order of the court, and this may seem to be unfair; but any appearance of unfairness is dispelled by the reflection that the plaintiff has been afforded an opportunity to recover his loss and has failed to take it by proceeding with reasonable diligence.

In my judgment the same principles ought to apply to the discharge of the cross-undertaking for failure to prosecute the inquiry as apply to the grant or refusal of the inquiry in the first place. The enforcement of the cross-undertaking should be regarded as being conditional on the inquiry being applied for promptly and prosecuted with reasonable diligence. This would allow for a desirable degree of flexibility. Just as the Court may decline to enforce the cross-undertaking if the plaintiff does not apply to enforce it with reasonable promptitude, so it ought to be willing to discharge it where the plaintiff does not conduct the enforcement proceedings with reasonable diligence.

This is not to say that the presence or absence of prejudice to the defendant is irrelevant. Its presence will always be highly material. Where the delay has occasioned significant prejudice, it will almost always be right to dismiss the inquiry and discharge the cross-undertaking. But the greater the delay, the less the need to establish prejudice; and the court should not hesitate to discharge the cross-undertaking and dismiss the inquiry where there has been excessive and prolonged delay even though it cannot be shown to have occasioned any prejudice to the other party.

Accordingly, I am of opinion that the Judge was in error in concluding that the Attorney's inability to demonstrate that Barratt's delays had occasioned him prejudice or made a fair trial of the inquiry impossible was fatal to his application. It follows that we are free to exercise the discretion for ourselves.

How should the discretion be exercised?.

I am, however, satisfied that the discretion ought to be exercised in favour of allowing the inquiry to proceed. Barratt has been guilty of a series of delays, none of more than nine months, with a cumulative total of 20 months, but this must be viewed in the perspective of a complex and difficult case which was always likely to be long in coming to a hearing and in which some extensions of time would almost certainly have been granted if applied for in time. The delays have largely been caused by difficulties experienced by Barratt's experts in formulating and quantifying its claim. They have caused no prejudice to the Attorney. Barratt has a substantial claim which will be lost altogether if the inquiry is dismissed. The timetable has been set for a hearing in less than nine months from now. Barratt cannot be said to have prosecuted the inquiry with any sense of urgency, but neither can Barratt’s conduct be regarded as so unreasonable that it merits the discharge of the cross-undertaking.

SIR BRIAN NEILL:

I agree that this appeal should be dismissed for the reasons set out in the judgment of Millett L.J. which I have had the advantage of reading in draft. As, however, the appeal raises a question of some importance it may be helpful if I explain in my own words the steps by which I have reached this conclusion.

The facts leading to this appeal are set out in the judgment of H.H. Judge Gilliland Q.C dated 12 August l996 and in the summary included in the judgment of Millett L.J. I need not repeat them.

It is accepted by Barratt that in the prosecution of the proceedings for the enforcement of the cross-undertaking in damages given by the AG it has been guilty of inordinate and inexcusable delay, as that phrase is understood in the context of claims to strike out actions for want of prosecution. The undertaking was given to the Court of Appeal on 18 September l991. We are concerned with the effect of that delay.

The issues for decision can be formulated as follows:

The principles to be applied when the court is considering an application to strike out an action for want of prosecution were examined by the House of Lords in Birkett v James [l978] AC 297. The principles enunciated in that case have not escaped criticism, but it seems clear from the recent decision of the House in Grovit v Doctor [l997] 1 WLR 640 that any substantial inroad into these principles must await the implementation of new rules of procedure: see ibid at 644D per Lord Woolf.

The classic exposition of the Birkett v James principles is to be found in the opinion of Lord Diplock at 318F where he stated that the power to strike out an action for want of prosecution should be exercised

“....only where the court is satisfied either (1) that the default has been intentional and contumelious, e.g., disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants either as between themselves and the plaintiff or between each other or between them and a third party”.

It may be noted that an action may be struck out in some circumstances as an abuse of process as a separate ground from want of prosecution. In Grovit v Doctor (supra) at 467 Lord Woolf explained this separate ground as follows:

“The courts exist to enable parties to have their disputes resolved. To commence and to continue litigation which you have no intention to bring to conclusion can amount to abuse of process. Where this is the situation the party against whom the proceedings is brought is entitled to apply to have the action struck out and if justice so requires (which will frequently be the case) the courts will dismiss the action. The evidence which was relied upon to establish the abuse of process may be the plaintiff’s inactivity. The same evidence will then no doubt be capable of supporting an application to dismiss for want of prosecution. However, if there is an abuse of process, it is not strictly necessary to establish want of prosecution under either of the limbs identified by Lord Diplock in Birkett v James ”.

In the present case the judge applied the test set out in the second of Lord Diplock’s two limbs. He held that is was necessary for the AG to establish prejudice in addition to inordinate and inexcusable delay.

Millett L.J. has explained the reason why delay alone is insufficient to justify striking out an action for want of prosecution. It is because striking out is a Draconian measure which denies the plaintiff his cause of action and deprives him of any remedy for the invasion of his legal rights. However, as he has also explained, these considerations do not apply in the same way to proceedings to enforce a cross-undertaking.

The undertaking, though described as an undertaking as to damages, does not found any cause of action. Moreover, the undertaking is not given to the party enjoined but to the Court. If it is subsequently established that the interlocutory injunction or other order should not have been made, the party enjoined can then come back to the court to apply for compensation.

I am satisfied, for the reasons which I will explain more fully later, that the correct principles to be applied in considering an application to strike out proceedings founded on a cross-undertaking are not the same as those applicable to an application to strike out an action. The court has a discretion to enforce a cross-undertaking; the party seeking to enforce the cross-undertaking has no right to damages or other relief.

The Judge concluded that on balance he was not satisfied that there had been or would be substantial prejudice to the AG as a result of the delay which had occurred, nor that there was a substantial risk that there could not be a fair trial. I too am not persuaded that the Judge’s conclusion in this respect can be faulted.

In Financiera Avenida v Shiblaq (7 November l990) (unreported) the Court of Appeal gave guidance as to the correct approach to an application by a defendant to enforce a cross-undertaking in damages. Lloyd L.J. said this:

“Two questions arise whenever there is an application by a defendant to enforce a cross-undertaking in damages. The first question is whether the undertaking ought to be enforced at all. This depends on the circumstances in which the injunction was obtained, the success or otherwise of the plaintiff at the trial, the subsequent conduct of the defendant and all the other circumstances of the case. It is essentially a question of discretion. A discretion is usually exercised by the trial judge since he is bound to know more of the facts of the case than anyone else. If the first question is answered in favour of the defendant, the second question is whether the defendant has suffered any damage by reason of the granting of the injunction. Here ordinary principles of the law of contract apply both as to causation and as to quantum: see Hoffmann-la-Roche & Co. AG v Secretary of State for Trade and Industry [l975] AC 295 per Lord Diplock at p.361.”

In the ordinary case where it is shown that an interlocutory injunction has been wrongly obtained, the court, in the absence of special circumstances, will exercise its discretion in favour of enforcing the undertaking. But the cases cited by Peter Gibson L.J. in Cheltenham & Gloucester Building Society v Ricketts [l993] 1 WLR 1547 at 1557 show that a cross-undertaking would not be enforced if the court did not consider that it would be just to do so.

In my judgment a similar approach should be adopted to an application to strike out proceedings to enforce a cross-undertaking for want of prosecution. The court should look at all the circumstances including any periods of delay and any prejudice which may have been caused by that delay to the party who gave the undertaking. The claim to compensation is an equitable remedy over which the court can retain control. The Court has a discretion whether or not to allow the undertaking to be enforced; by parity of reasoning the court has a discretion whether or not to allow the enforcement proceedings to continue.

On this aspect of the case I am in complete agreement with the judgment of Millett L.J. I too am satisfied that the discretion should be exercised in favour of allowing the inquiry to proceed.

LORD JUSTICE KENNEDY:

I have had the advantage of reading in draft the judgments of Lord Justice Millett and Sir Brian Neill. I agree with them, and there is nothing that I wish to add.

Order: Appeal dismissed